The Microfinance Law (The Pyidaungsu Hluttaw Law ? The Microfinance Law ... Microfinance means extending

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  • The Microfinance Law

    (The Pyidaungsu Hluttaw Law No.13)

    The 5th Waxing Day of Nadaw, 1373 M.E.

    (30th, November, 2011)

    The Pyidaungsu Hluttaw hereby enacts the following Law:

    Chapter I

    Title and Definition

    1. The Law shall be called the Microfinance Law.

    2. The following expressions contained in this law shall have meanings given hereunder:

    (a) Microfinance means extending micro-credit to the grass root people, accepting

    deposits from them, carrying out remittance, carrying out insurance business,

    borrowing money from local and abroad and carrying out other financial activities.

    (b) Microfinance Institution means local and foreign institutions, partnership firms,

    companies, co-operative societies, banks and nonbanking financial institutions,

    formed and registered under the relevant law, which is funded with own capital,

    charity and grant, and obtain license to operate microfinance business in order to

    reduce the poverty of the grass root people and to improve their socio-economic

    life.

    (c) Micro-credit means the loan without collateral to reduce the poverty of grass root

    people and to improve their socio-economic life.

    (d) Grass root people mean the public including low-income farmers, labors and

    vendors who reside in rural and urban area.

    (e) Rural Development and Poverty Reduction Working Committee means the

    Working Committee on the Rural Development and Poverty Reduction formed by

    the Office of the President of the Union.

    (f) Ministry means the Ministry of Finance and revenue of the Union Government.

    (g) Supervisory Committee means the Microfinance Supervisory Committee formed by

    the Union Government under this Law.

    (h) Working Committee means the Microfinance Development Working Committee

    formed by the respective Region or State Government and Nay Pyi Taw Council

    under this Law.

  • (i) Myanma Microfinance Supervisory Bureau means the Myanmar Microfinance

    Supervisory Bureau under the Ministry of Finance and Revenue of the Union

    Government.

    (j) Management Committee means the management committee of microfinance

    institution.

    (k) Deposit means the money deposited by the member of microfinance institution

    which is payable on demand or on any other condition. Such expression also

    includes the savings.

    (l) License to Operate means the license issued under this Law to carry out

    microfinance activities.

    Chapter II

    Objective

    3. The objectives of this Law are as follows:

    (a) to reduce the poverty of the grass root people;

    (b) to develop social, education, health and economic status of the grass root people;

    (c) to create job opportunities;

    (d) to nurture and cultivate the saving habit;

    (e) to encourage the emergence of new small-scaled businesses;

    (f) to create the extend the cottage businesses;

    (g) to assist the grass root people with other means of earning as well as agriculture and

    livestock breeding;

    (h) to acquire and disseminate technical know-how from local and abroad.

    Chapter III

    Formation of the Rural Development and Poverty Reduction Working Committee and Functions and

    Duties thereof

    4. The Office of the President of the Union shall form the Rural Development and Poverty

    Reduction Working Committee comprising a Vice-President as Chairman and suitable persons.

    5. The Rural Development and Poverty Reduction Working Committee shall coordinate, assist

    and support the Supervisory Committee, working committees in respective Region or State and Nay

    Pyi Taw for rural development and poverty reduction.

  • Chapter IV

    Formation of the Microfinance Supervisory Committee, Functions, Duties and Powers thereof

    6. The Union Government shall form the Microfinance Supervisory Committee comprising the

    Union Minister of the Ministry of as the Chairman, the Managing Director of the Myanma

    Microfinance Supervisory Bureau as the secretary and persons from suitable Government

    departments and organizations as members.

    7. The functions and duties of the Supervisory Committee are as follows:

    (a) implementing the policy and directives relating to the microfinance business

    adopted by the Rural Development and Poverty Reduction Working Committee;

    (b) laying down the policy and directives relating to the microfinance business to the

    working committees;

    (c) managing and carrying out the financial support finance to microfinance business in

    connection with the respective Ministry, Associations, Specialized companies and

    Banks;

    (d) prescribing rules and regulations which shall be observed by Microfinance

    Institutions;

    (e) scrutinizing and granting relating to the application the license to operate of

    microfinance business;

    (f) determining the minimum capital to be contributed by institution which is desirous

    to carry out the microfinance business according to the type of institution;

    (g) determining the interest rate on deposit, the interest rate on and service fees in

    accordance with procedures which being exercised by the Central Bank of Myanmar

    to be in line the market;

    (h) imposing administrative penalties on Microfinance Institution which do not observe

    the terms and conditions;

    (i) scrutinizing and reviewing the work performance of Microfinance Institutions and

    reporting and submitting to the Rural Development and Poverty Reduction Working

    Committee.

    8. The powers of the Supervisory Committee are as follows:

    (a) determining the license fees, license fees for microfinance business;

    (b) hiring any person from local or abroad with the approval of Rural Development and

    Poverty Reduction Working Committee in order to support in performing the

    functions and duties of Supervisory Committee;

    (c) dealing with the international financial institutions and international non-

    governmental organizations.

    Chapter V

  • Formation of the Microfinance Development Working Committee and Functions and Duties therof

    9. The respective Region or State Government and Nay Pyi Taw Council shall form the

    microfinance development working committee comprising suitable persons.

    10. The functions and duties of the working committee are as follows:

    (a) managing and carrying out the financial support to microfinance Institutions in

    connection with the respective Ministry, Associations, Specialized companies and

    Banks;

    (b) scrutinizing and submitting the applications for carrying out microfinance to the

    Supervisory Committee;

    (c) supervising the microfinance institutions;

    (d) reporting and submitting the work performances of microfinance institutions to the

    Supervisory Committee in accordance with the stipulations;

    (e) training and dissemination of knowledge for the sustainable development of

    microfinance businesses;

    (f) performing duties assigned by the Supervisory Committee from time to tome.

    Chapter VI

    Functions and Duties of the Myanma Microfinance Supervisory Bureau

    11. The Myanma Microfinance Supervisory Bureau shall carry out the following functioins and

    duties relating to microfinance business:

    (a) scrutinizing the applications to carry out microfinance submitting to the respective

    working committee;

    (b) prescribing the formats of accounts and forms of report to use in microfinance

    institution;

    (c) supervising and field-inspecting the microfinance institution

    (d) reporting and submitting the work performances of microfinance institutions to the

    respective working committee in accordance with the stipulations;

    (e) performing the duties assigned by the Supervisory Committee to the respective

    working committee from time to time;

    12. The Myanma Microfinance Supervisory Bureau shall also has responsibilities and carry out

    the works arising out of or in connection with the performance of functions and duties conferred

    under this Law.

    Chapter VII

    Establishment

  • 13. The institution desirous to carry out the microfinance shall be institution formed under the

    Myanmar Companies Act, the Cooperative Society Act, the Law relating to Formation of Associations

    and any other Law.

    14. The institution desirous to carry out the microfinance shall:

    (a) draft the memorandum of association and articles of association;

    (b) form the management committee and manage in accordance with the

    memorandum of association and article of association;

    (c) be fulfilled with the necessary qualification to be a member of management

    committee prescribed by the Supervisory Committee in forming the management

    committee;

    15. The management committee of the microfinance institution may delegate its powers to the

    responsible persons of the relevant microfinance institution.

    16. If microfinance institution is desirous to amend the memorandum of association and articles

    of association, the microfinance institution shall submit to repective working Committee and shall

    amend only after obtaining the prior approval of Supervisory Committee.

    Chapter VIII

    License to Operate

    17. The institution desirous to carry out the microfinance shall submit the stipulated application

    attached with the feasibility study including the following facts to the Supervisory Committee

    through the respective working committee to carry out the business:

    (a) description of location to be carried out microfinance, existence of market and

    having interest of the community concerned;

    (b) the financial resources required and how they may be acquired;

    (c) expected benefit to be obtained if the microfinance is carried out and the

    arrangement to manage the benefits;

    (d) management qualification and skill;

    (e) types of microfinance desirous to be carried out.

    18. The microfinance institutions shall be categorized as follows:

    (a) non deposit taking microfinance institution;

    (b) deposit taking microfinance institution

    19. (a) The non deposit taking microfinance institution shall carry out extending micro-

    credit by the funds collected by other means which is not deposit from the public,

    compulsory savings of members whenever the members acquired the micro-credit;

    (b) The deposit taking microfinance institution shall carry out extending micro-credit by

    the funds collected by other means which is not deposit from the public and

  • compulsory savings of members whenever the members acquired the micro-credit

    and voluntary saving deposits.

    20. The institutions desirous to carry out the microfinance shall:

    (a) subscribe the paid-up capital in cash;

    (b) deposit the fully paid-up capital to the accounts of the Myanma Microfinance

    Supervisory Bureau at the prescribed Myanmar Economic Bank in the respective

    Region or State and Nay Pyi Taw. Such paid-up capital shall be entitled to withdraw

    only the completion of issuing license from the Supervisory Committee.

    21. (a) The Supervisory Committee may, after scrutinizing the duly application form and the

    feasibility study, issue or refuse to the license to operate within thirty (30) days from

    the date of receipt of application.

    (b) The license to operate shall be granted without limit duration.

    22. A license shall not be granted to the institution desirous to carry out microfinance if, in the

    Supervisory Committees opinion, the name chosen the instution might mislead the public regarding

    the true nature shareholders or activities;

    23. The microfinance institution shall deposit the prescribed fees from license to operate within

    15 days from the date of receipt of the license to operate the accounts of the Myanma Microfinance

    Supervisory Bureau at the present Myanma Economic Bank in the Respective Region or State and

    Nay Pyi Taw.

    24. The Supervisory Committee shall, in granting or withdrawing a license to a microfinance

    institution, publish it in the Myanmar Gazette.

    25. The microfinance institution:

    (a) shall commence the business within six months from the date of receipt of the

    license;

    (b) shall not transfer the license;

    26. If any of the following situations occurs, the Supervisory Committee shall withdraw the

    license of operate of the relevant microfinance institution.

    (a) failing, within the period specified, to deposit the amended minimum capital

    requirements prescribed for the microfinance institution;

    (b) failing, within the period specified, to restore the minimum capital required due to

    losses in business;

    (c) liquidation voluntarily or being liquidated;

    (d) extinguishing the original legal entity due to the merging with other microfinance

    institution or due to secession of institution;

    (e) failture to compy by-laws and directives issued by Supervisory Committee and

    respective working committee.

  • 27. (a) If the microfinance institution is desirous to merger with any other microfinance

    institution or session of its institution, it shall submit and obtain the prior approval

    of the Supervisory Committee through the respective working committee.

    (b) The microfinance institution which will be emerged due to merger or secession

    under sub-section (a) shall carry out the microfinance business only when it obtains

    the license to operate issued by Supervisory Committee.

    28. The microfinance institutions shall obtain the prior approval of Supervisory Committee

    through the respective working committee for establishment of branch offices, changing the

    location and closing of business

    Chapter IX

    Functions, Duties and Powers of the Microfinance Institution

    29. The microfinance institution may, with the approval of the Supervisory Committee, carry out

    the following function:

    (a) extending micro-credit;

    (b) accepting the deposit;

    (c) carrying out remittance;

    (d) carrying out the insurance business;

    (e) borrowing from the local and abroad;

    (f) carrying out other financial activities.

    30. The microfinance institution shall obtain the following legal documents in providing micro-

    credit;

    (a) the credit application and the submission of the utilization of credit;

    (b) the records of undertaking of the borrower and guarantors which will be basically

    supported for the microfinance business;

    (c) if it is the agreement signed by the person himself who shall obtain the micro-credit

    and matter collectively decided, the meeting minute agreed on such matter.

    31. The microfinance institution shall, in providing micro-credit, carry out in accordance with the

    terms and conditions prescribed by the Supervisory Committee in order to protect and preserve the

    long term existence of its business.

    32. The microfinance institution shall regularly notify their custiomers of the terms and

    conditions associated with their deposits and loans, including the annual rate of interest and the

    calculation method used. The Supervisory Committee shall determine the intervals at which such

    declaration shall be made and the forms to be used.

    33. (a) The microfinance institution may, subject to compliance with the terms and

    conditions prescribed by the Supervisory Committee increase its capital by way of

    establishing of reserves.

  • (b) A microfinance institution shall set aside 25 per cent of its profits, as prescribed by

    the Supervisory Committee, in a gene reserve account until this account reaches 100

    per cent of paid-up capital. The Supervisory Committee may also require

    microfinance institutions to make additional provisions against specific assets.

    Microfinance institution may also make additional provisions on their own initiative.

    34. The microfinance institution shall be prohibited from engaging manipulative practices in

    order to obtain an unfair advantage for themselves for third parties.

    35. The microfinance institution shall comply the provisions of the committee of Money

    Laundering Law.

    Chapter X

    Auditing, Reporting and Supervision

    36. The Auditor shall be appointed to each microfinance institution by approval of Supervisory

    Committee.

    37. The auditor of the microfinance institution shall have the following duties and

    responsibilities:

    (a) preparing the audit report on the balance-sheet, profit and loss of account after

    having audited in accordance with the Myanmar Standards on Auditing and

    assessing and submitting in report whether the financial statements in such report

    adequate reflect the financial position of the institution and its solvency;

    (b) notifying the activities which may cause the loss for the business and the defects

    and requirements of the accounts.

    38. The microfinance institution shall be required to prepare periodic reports using the

    prescribed forms, providing sufficient information on their administrative and

    operational status, solvency, and provitability for an assessment of the stability of

    and trends in their financial position. The reports shall be prepared in accordance

    with the prescribed accounting standards.

    39. The auditors report and the balance-sheet for the financial year shall be published in the

    manner as prescribed and approved by the management committee and the

    shareholders, for public information.

    40. The microfinance institution shall accept the inspection of the auditors appointed by the

    Supervisory Committee or inspectors assigned by the respective working committee.

    In inspecting so, auditors or inspectors may:

    (a) examine the accounts and related documents, the books and other documents;

    (b) ask supervisor, administrators, agents, personnel and members of the microfinance

    institution for information on any matter relating ot its organization and operation.

    41. The Supervisory Committee may have an Audit Committee comprising three members in a

    microfinance institution. The Audit Committee shall:

  • (a) monitor whether the microfinance institution carries out in conformity with the

    prescribed terms and conditions or not. Moreover, it shall submit to the

    management committee the matters which it deems fit;

    (b) give its opinion on the matters which are required by the management committee.

    42. The Audit Committee shall meet ordinarily once in three months and extraordinarily when

    convened by the management committee. All members of the Audit Committee

    shall be present at such meetings and shall be no abstentions from voting. Decisions

    shall be taken by majority votes of the members.

    43. The management committee of the microfinance institution may appoint or hire experts to

    assist the Audit Committee in relation with activities contained in section 40.

    Chapter XI

    Taking Action by Administrative Means

    44. The Supervisory Committee shall, if the microfinance institutions, its members,

    shareholders, administrators, managers and personnel violate any of the provisions

    of this Law, pass the following administrative penalty:

    (a) warnings;

    (b) orders including those restricting the operations of microfinance institution,

    (c) fines;

    (d) temporary or permanent termination from duties in the microfinance institution;

    (e) cancellation of the license to operate

    45. The Supervisory Committee shall pass administrative penalties contained in section 44

    against any person or any legal entity which violates any of the provisions contained

    in this Law by carrying out the activities prescribed under this Law to be performed

    only by the microfinance institution.

    46. The person who is being taken action shall have the full right to defend. In addition, the

    person being taken action shall have the right of appeal to the Rural Development

    and Poverty Reduction Working Committee within 30 days from the date the

    penalty order is received. During the appeal period, the penalty shall be suspended.

    The decision of the Rural Development and Poverty Reduction Working Committee

    shall be final and conclusive.

    47. The administrative penalties passed under this Law shall not preclude taking criminal action

    or civil action.

    48. The person who is being passed penalty under section 44 shall compensate immediately to

    the microfinance institution or to other persons for any damages caused.

    Chaper XII

  • Liquidation

    49. The Supervisory Committee may determine the period to restore the normal situation if the

    situation occurs that may lose the deposits and capital fund of the persons in dealing

    with such institution as the situation is not in conformity with the minimum

    requirement to carry out the business of the relevant microfinance institution is not

    restored to normal within the specified period, the license to operate may be

    cancelled and my liquidate that microfinance institution in accordance with the

    stipulations.

    50. Before passing the order of liquidation:

    (a) the body formed by the Supervisory Committee or the body formed by the relevant

    working committee with the approval of the Supervisory Committee shall

    investigate;

    (b) the supervisory committee shall be render right to defend to the relevant

    microfinance institution under sub-section (a).

    51. If the relevant body contained in sub-section (a) of section 50 submits that it should be

    liquidate, the Supervisory Committee shall order to liquidate the microfinance

    institution.

    52. In liquidating the microfinance institution, the Supervisory Committee

    (a) may cause to carry out by handing over the administrative matters of such

    institution and until the liquidation has been completed by appointing a liquidator or

    by forming assigning the liquidation body consisting of suitable citizens.

    (b) shall liquidate the receivable and payable of such institution

    Chapter XIII

    Prohibitions

    53. The members, personnel and auditors of the microfinance institution shall not, without

    permission under the law, disclose or publish information which they have leaned in

    the performance of the financial activities and services, or allow such information to

    be seen or examined by another person.

    54. No person shall carry out business of the microfinance institution without a license to

    operate

    55. Any member or personnel of the Supervisory Committee and relevant working committee

    shall not, without permission under the law, disclose or publish information which

    they have learned in the performance of the duties, or allow such information to be

    seen or examined by another person.

    Chapter XIV

    Offences and Penalties

  • 56. Any member, personnel and auditor of the microfinance institution who violates the

    prohibition under section 53 shall, on conviction, be punished with fine or with

    imprisonment for a term not exceeding two years or with both.

    57. Any person who violates the prohibition under section 54 shall, on conviction, be punished

    with fine or with imprisonment for a term not exceeding five years or with both.

    58. Any member or personnel of the Supervisory Committee and respective working committee

    who violates the prohibition under section 55 shall, on conviction, be punished with

    fine or with imprisonment for a term not exceeding two years of with-both.

    Chapter XV

    Miscellaneous

    59. The member, who is not civil service personnel, included in the Supervisory Committee is

    entitled to receive the remuneration prescribed by the Union Government or the

    member, who is not civil service personnel, included in the working Committee is

    entitled to receive the remuneration prescribed by the relevant Region or State

    Government and Nay Pyi Taw Council.

    60. The microfinance institution shall have the right to carry out under its own seal, as a legal

    entity having perpetual succession, capable of suing and being sued.

    61. Notwithstanding anything contained in the Registration Act, the instruments executed in

    respect of micro-credit extended by the microfinance institution shall be exempted

    from registration and from payment of stamp duty under the existing Law.

    62. Levying tax on the microfinance institution shall be subject to existing laws.

    63. The offences contained in section 56 and section 58 are prescribed as cognizable offences.

    64. In taking legal action under section 56, 57 and 58 the prior sanction of the Supervisory

    Committee shall be obtained.

    65. The institutions which performing the microfinance business before the enactment of this

    law desirous to continue to carry out the microfinance business under this Law shall

    apply for the license to operate within three months from the date of the enactment

    of this Law in accordance with the provisions of this Law.

    66. The activities carried out to complete liquidation within the stipulated period with the

    permission of the Supervisory Committee relating to the microfinance business

    before the enactment of this Law shall not be applied with section 54.

    67. For the purpose of carrying out the provisions of this law:

    (a) the Ministry shall undertake the responsibilities to carry tout the office works of the

    Supervisory Committee and bear the expenses.

    (b) the respective Region or State Government and Nay Pyi Taw Council shall undertake

    the responsibilities to carry out the office works of the Working Committee and bear

    the expenses.

  • 68. In implementing the provisions contained in this Law:

    (a) the Ministry may, with the approval of the Union Government, issue necessary rules,

    regulations or by-laws and issue necessary orders, directives and procedures;

    (b) the Supervisory Committee and the respective working committee may issue

    necessary orders and directives.

    I hereby sign under the Constitution of the Republic of the Union of Myanmar

    Sd/Thein Sein

    The President

    The Republic of Union of Myanmar

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